OKLAHOMA CITY -- Stryker ( SYK) hit its targets.

The orthopedic device maker met Wall Street's earnings expectations for the third quarter and topped sales estimates. Profit surged 21% from a year ago to $229 million, or 55 cents a share. Revenue jumped 18% to $1.45 billion, beating projections by $5 million, as demand for the company's orthopedic devices and medical equipment continued to rise.

"Our unique set of businesses and a strong focus on execution helped us deliver another excellent quarter," Stryker boasted on Wednesday. Moreover, "the company's outlook for 2007 continues to be optimistic ... despite the potential for continued pricing pressure in certain markets."

For the full year, Stryker now expects sales to jump 13% to 13.5% -- up from previous forecasts -- and earnings to meet analyst targets of $2.40 a share.

Stryker's stock inched up 23 cents to $72.42 following Wednesday's update. The shares currently hover near the top of their 52-week range.

Before that third-quarter report, analysts were expressing mixed feelings about Stryker and the industry as a whole.

Baird analyst Jeff Johnson predicted that Stryker would report healthy results -- enjoying its fourth straight quarter of rising orthopedic sales -- but felt that the company's stock already reflected this upbeat outlook. Thus, while he looked for Stryker to meet Wall Street expectations for the quarter, he suggested that investors remain on the sidelines unless the company's stock dropped and provided a more attractive entry point.

Meanwhile, Johnson pushed investors toward industry giant Zimmer ( ZMH) instead. He portrayed Zimmer's stock, hurt by pricing and margin concerns, as cheap and suggested that a rebound could be on the way.

"Investor concern has grown in just the past quarter regarding ZMH's near-term operating margin expansion opportunities, as the company invests in its lagging trauma and spine business," Johnson noted earlier this week. "In our opinion, while the investments ZMH management may need to make in trauma and/or spine could reduce the extent operating margins expand over coming quarters, we believe management has been somewhat misunderstood with its comments on this topic -- and that, even as these investments are made, operating margins can still expand."

Looking ahead, he added, "we believe the upside potential in this name is nearly 25% over the next 12 months and therefore maintain our outperform rating."

Specifically, Johnson predicted that Zimmer's stock -- up 48 cents to $82.05 on Wednesday -- could soar past the $100 mark to $103 a share over the course of the next year. His firm has received compensation for noninvestment banking business from Stryker in the past 12 months, and hopes to secure investment banking business from both Stryker and Zimmer going forward.

Canaccord Adams analyst William Plovanic sees plenty to like about Stryker as well.

Late last month, Plovanic pointed to Stryker's new product launches -- especially one in the booming hip-resurfacing space -- as a key reason for his bullish view. He saw another reason for optimism, too. Notably, when industry players last month settled a sweeping government probe, Stryker alone escaped without any financial penalties at all.

"It is important to note," Plovanic said, "that Stryker has not admitted to any wrongdoing or pleaded guilty to any criminal charges and will not pay any criminal fines" going forward.

Plovanic has a buy recommendation and an $87 price target on Stryker's stock. His firm hopes to secure investment banking business from the company down the road.

But Leerink Swann analyst Jason Wittes feels that all of the orthopedic players, including Stryker, could suffer fallout from the recent settlement. Importantly, Wittes stressed, the companies promised sweeping reforms that could hurt pricing and hamper growth in the future.

Wittes therefore feels cautious about Stryker and Zimmer alike.

"Traditionally, pricing is a cyclical phenomenon," Wittes wrote following last month's government settlement. "But those anticipating a rebound are in for a surprise. With new reforms in place, we don't expect an upward inflection at least for the next several years."

Ultimately, he concluded, "the government appears to have punted on the dollar amounts but scored a touchdown with the explicit reforms dictated by the settlement terms."